As a business owner, you will want to know the tax policies of the state within which you are operating. This knowledge will aid you in your decision making as you run your business and keep you from violating any laws. Below we will highlight some of the tax policies specific to New Mexico. Visit the Taxation and Revenue Department for more detailed information.
New Mexico has no estate, inheritance or gift taxes.[ + Expand All ]
New Mexico requires that every resident or non-resident who is employed or engaged in business within, into, or from the state pay the PIT. The tax is applied to any income received from property or employment in the state. The amount of money to which this tax will be applied is the federal adjusted gross income. PIT carries a minimum rate of 1.7% and a maximum rate of 4.9%. New Mexico State Statutes Chapter 7, Article 2 NMSA 1978.
Gross receipts equals the total amount of money or value of other consideration received from:
The gross receipts tax rate varies from 5.125% to 8.6875% depending on the location of the business within the state. This variation is a result of the combination of state, county, and municipal rates. Changes to the tax rates may occur twice a year in January and July. Although the gross receipts tax is imposed on businesses, it is common for a business to pass the gross receipts tax on to the purchaser, either by separately stating it on the invoice, or by combining the tax with the selling price.
The tax is on the business’ gross receipts. Whether the receipts (net of returns and allowances) are taxable depends on whether the business can take advantage of an exemption or deduction. The Taxation and Revenue Department provides an Overview of Gross Receipts and Compensating Taxes.
New Mexico offers a number of tax incentives for businesses creating new jobs or investment.
The compensating tax is an excise tax imposed on persons using property or services in New Mexico.
It is called a compensating tax because it serves in the absence of a gross receipts tax on the purchase of property for use. It is intended to protect New Mexico businesses from unfair competition. New Mexico allows a credit against the compensating tax for sales, use, or similar taxes paid to another state when the buyer acquired the property. The rate on certain property is 5.125% and 5% on certain services used in New Mexico. The Gross Receipts and Compensating Tax Act is compiled as Sections 7-9-1 through 7-9-114 NMSA 1978.
CIT is applied to the net income of every domestic corporation as well as every foreign corporation employed or engaged in the transaction of business within, into, or from the State of New Mexico. It is also applied to income from property or employment within the state.
A “Corporation” is any corporation, joint stock company, real estate trusts organized and operated under the Real Estate Trust Act, financial corporation, bank, and any other business association. The term also refers to limited liability companies and partnerships taxed as corporations under the Internal Revenue Code. "Net income" generally is federal taxable income adjusted to exclude amounts not taxable by states.
New Mexico corporate income tax is imposed on total net income (including New Mexico and non-New Mexico income). The percentage of New Mexico income is then applied to the gross tax:
*The 2013 tax reform bill signed into law by Governor Susana Martinez will reduce the top two corporate income tax brackets to 5.9% over the next five years. In addition, the bill phases in a single sales factor apportionment methodology for the income of multi-state corporations over the same five-year period.
The reduction will be phased in as follows:
|Year||<$500,000||$500,000 - $1 million||>$1 million|
A single sales factor apportionment formula is provided for manufacturers.
Any corporation listed in the combined unitary or the consolidated tax returns of the corporation exercises its corporate franchise in New Mexico, regardless of whether or not income tax is due, pays a uniform fee of $50 per corporation each year. The requirement to file and pay the franchise tax also falls on anyone who files a federal S-corporation return. Corporate Income and Corporate Franchise Taxes: New Mexico State Statutes Chapter 7, Article 2A, NMSA 1978.
NOTE: “CRS” is New Mexico Taxation and Revenue Department’s Combined Reporting System. Using the Combined Reporting System businesses can report one or more of the following taxes:
New Mexico has the lowest per capita property tax in the nation. Taxes are imposed on one-third of assessed value (“net taxable value”), which is typically between 80% and 100% of market value. Most property is appraised by county assessors in the county in which it is located. The Taxation and Revenue Department assesses certain types of non-residential property, typically industrial property that extends across county boundaries, including property associated with railroads, pipelines, communication systems and mineral extraction. Property taxes are collected and distributed by county treasurers. Major revenue recipients include counties, municipalities, and school districts.
Rates vary substantially and depend on property type and location. For example, residential property rates range from about $9 to $38 per $1,000 of net taxable value after exemptions are taken. Non-residential property tax rates range from $12 to $44 per $1,000 of net taxable value. The statewide average rates are about $26 per $1,000 for residential property and $29 per $1,000 for non-residential property, or about .8% of assessed value.
Every employer who elects or is required to be covered by the Workers’ Compensation Act, and every employee covered by the Act is assessed a fee for funding the administration of the Workers’ Compensation Administration. The fee is different from workers’ compensation insurance coverage and every employer must obtain a workers’ compensation insurance policy. The fee for the employer is $4.30 times the number of covered employees working on the last day of the quarter. The employer contribution is $2.30 for each covered employee. The employee contribution is $2.00 and should be taken as a payroll deduction. The fee is based on the number of covered employees working on the last day of the quarter.
Starting in 2015 new contributing employers will have a rate that is the greater of their industry average Unemployment Insurance Contribution rate of 1%. Industry classifications for contributory, experienced employers are used to determine the average industry rates of new employers. Based on the NAICS code for the establishment, this is the employer’s Assigned Industry Rate. This rate will remain in effect until the employer has acquired two years as an experienced rate employer. The annual industry rate averages are provided by the New Mexico Workforce Solutions Department (DWS).
After becoming experienced rated, contribution rates will be set based on the employer’s benefit ratio. The benefit ratio is measured by dividing the employer’s claims experience over the previous three years by the employer’s taxable payroll over the same time period. The resulting benefit ratio is then multiplied by a “reserve factor,” which is set by the DWS based on the solvency of the Unemployment Trust Fund. The maximum contribution rate is 5.4% and the minimum rate is 0.33%. Visit the Unemployment Insurance Tax System for more information.